FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) [X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended October 27, 2000. ---------------- [ ] Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from ___________ to _________________. Commission File Number 0-21862 ------- OROAMERICA, INC. ---------------- (Exact name of registrant as specified in its charter) DELAWARE 94-2385342 ------------------------- -------------- (State or other jurisdiction) (I.R.S. Employer Identification No.) of incorporation or organization) 443 NORTH VARNEY STREET, BURBANK, CALIFORNIA 91502 -------------------------------------------- -------- (Address of principal executive offices) (Zip Code) (818) 848-5555 -------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: SHARES OUTSTANDING AS OF CLASS DECEMBER 4, 2000 ----- ------------------------------ Common Stock, $.001 par value 5,294,598 OROAMERICA, INC. REPORT ON FORM 10-Q FOR THE QUARTER ENDED October 27, 2000 TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Page Item 1. Financial Statements Consolidated Balance Sheets............................. 1 Consolidated Statements of Income....................... 2 Consolidated Statements of Cash Flows................... 3 Notes to Consolidated Financial Statements.............. 4 - 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................... 7 - 11 PART II - OTHER INFORMATION Items 1. through 5. Not Applicable Item 6. Exhibits and Reports on Form 8-K........................ 12 SIGNATURES ........................................................ 13 PART I - Financial Information Item 1. Financial Statements OROAMERICA, INC. CONSOLIDATED BALANCE SHEETS

~~PART~~October I27, -January ~~FINANCIAL~~28, ~~INFORMATION~~(DOLLARS ~~Page~~IN THOUSANDS) 2000 2000 --------------------------------------------------------------------------------------------------------- ~~Item~~(Unaudited) 1.ASSETS ~~Financial~~Current ~~Statements~~assets: ~~Consolidated~~Cash ~~Balance~~and ~~Sheets~~cash ~~...................................................~~equivalents 1$ ~~Consolidated~~10,818 ~~Statements~~$ 26,923 Accounts receivable less allowance for returns and doubtful accounts of ~~Income~~$9,701 ~~.............................................~~and $11,840 33,623 15,270 Other accounts and notes receivable 610 865 Inventories (Note 2) ~~Consolidated~~15,991 ~~Statements~~15,846 ofDeferred ~~Cash~~income ~~Flows..........................................~~taxes 3,449 ~~Notes~~3,449 toPrepaid ~~Consolidated~~items ~~Financial~~and ~~Statements~~other ~~...................................~~current 4assets 1,358 780 Assets available for sale 144 468 ---------- 6---------- ~~Item~~Total 2current ~~Management's~~assets ~~Discussion~~65,993 63,601 Property and ~~Analysis~~equipment, ofnet ~~Financial~~14,199 ~~Condition~~15,232 Goodwill and ~~Results~~other ofintangible ~~Operations............................................~~assets, 7net ~~-11~~4,083 ~~PART~~4,428 IIPatents, net 3,831 4,198 Other assets 556 635 ---------- ~~OTHER~~---------- ~~INFORMATION~~$ ~~Items~~88,662 1$ ~~through~~88,094 3.========== ~~Not~~========== ~~Applicable~~LIABILITIES ~~Item~~AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 4,459 ~~Submission~~$ of5,726 ~~Matters~~Income totaxes apayable ~~Vote~~2,282 of1,092 ~~Security~~Accrued ~~Holders~~expenses 9,872 8,733 ---------- ---------- Current and total liabilities 16,613 15,551 ---------- ---------- Stockholders' equity: Preferred stock, 500,000 shares authorized, $.~~..........................~~001 12par ~~Item~~value; 5none issued and outstanding - - Common stock, 10,000,000 shares authorized, $.001 ~~Not~~par ~~Applicable~~value; ~~Item~~6,370,878 and 6.,368,878 ~~Exhibits~~shares issued at October 27, 2000 and ~~Reports~~January on28, ~~Form~~2000, 8respectively 6 6 Paid-~~K...............................................~~in 12capital ~~SIGNATURES~~43,574 ~~...............................................................................~~43,564 13Accumulated other comprehensive loss (67) (34) Note receivable from stock sale (190) (190) Treasury stock, 906,480 shares and 510,830 shares at October 27, 2000 and January 28, 2000, respectively (Note 5) (6,561) (3,841) Retained earnings 35,287 33,038 ---------- ---------- Total stockholders' equity 72,049 72,543 ---------- ---------- $ 88,662 $ 88,094 ========== ==========

See accompanying notes to condensed consolidated financial statements. 1 OROAMERICA, INC. CONSOLIDATED STATEMENTS OF INCOME Periods Ended October 27, 2000 and October 29, 1999 (Unaudited) (Dollars in thousands, except per share amounts)

~~July~~For ~~28,~~the ~~January~~For ~~28,~~the ~~(Dollars~~Thirteen inWeeks ~~thousands~~Ended Thirty-nine Weeks Ended October 27, ~~except~~October ~~share~~29, ~~amounts)~~October 27, October 29, 2000 1999 2000 1999 ---------- ------------ ------------- ---------- Net sales $ 48,214 $ 54,863 $ 112,322 $ 120,838 Cost of goods sold, exclusive of depreciation 38,979 44,144 91,766 99,520 ---------- ------------ ------------- ---------- ~~ASSETS~~Gross ~~(Unaudited)~~profit ~~Current~~9,235 ~~assets:~~10,719 ~~Cash and cash equivalents $ 29~~20,~~823~~556 ~~$ 26~~21,~~923~~318 ~~Accounts~~---------- ~~receivable~~------------ ~~less~~------------- ~~allowance~~---------- ~~for~~Selling, ~~returns~~general and ~~doubtful~~administrative ~~accounts~~expenses ~~of $6~~5,~~403~~188 ~~and $11~~4,~~840~~386 1115,~~678~~177 1512,~~270~~739 ~~Other~~Depreciation ~~accounts~~ and ~~notes~~amortization ~~receivable~~expense ~~428~~848 ~~865~~794 ~~Inventories~~2,604 ~~(Note~~ 2),126 14Interest expense 579 746 1,~~759~~385 151,~~846~~334 ~~Deferred~~Other income ~~taxes~~(314) ~~3,449~~(181) 3(1,~~449~~802) ~~Prepaid~~(688) ~~items~~---------- ~~and~~------------ ~~other~~------------- ~~current~~---------- ~~assets~~Total 1expenses 6,~~515~~301 ~~780~~5,745 ~~Assets~~17,364 ~~available~~15,511 ~~for~~---------- ~~sale~~------------ ~~426 468~~ ------------- ---------- ~~Total~~Income ~~current~~from ~~assets~~continuing ~~62,078~~operations ~~63,601~~before ~~Property~~income ~~and~~taxes ~~equipment~~2,934 ~~net~~4,974 143,~~530~~192 155,~~232~~807 ~~Goodwill~~Provision ~~and~~for ~~other~~income ~~intangible~~taxes ~~assets~~1,086 ~~net 4~~1,~~198~~806 41,~~428~~181 ~~Patents~~2,139 ~~net~~---------- ------------ ------------- ---------- Net income from continuing operations 1,848 3,~~953~~168 42,~~198~~011 ~~Other~~3,668 ~~assets~~Net ~~557~~income ~~635~~(loss) from discontinued operations 185 (463) 238 (1,164) ---------- ------------ ------------- ---------- Net income $ 852,~~316~~033 $ 882,~~094~~705 $ 2,249 $ 2,504 ========== ============ ~~LIABILITIES~~============= ~~AND~~========== ~~STOCKHOLDERS'~~Basic ~~EQUITY~~net ~~Current~~income ~~liabilities~~(loss) per share: ~~Accounts~~Net ~~payable~~income from continuing operations $ ~~5,225~~0.33 $ ~~5,726~~0.54 ~~Income~~$ ~~taxes~~0.35 ~~payable~~$ ~~1,089~~0.60 ~~1,092~~Net ~~Accrued~~income ~~expenses~~(loss) ~~7,541~~from ~~8,733~~discontinued operations 0.04 (0.08) 0.04 (0.19) --------- ------------ ~~Current and total liabilities 13,855 15,551~~ ------------- ---------- ~~Stockholders'~~Net ~~equity:~~income ~~Preferred~~per ~~stock,~~share ~~500,000~~$ ~~shares~~0.37 ~~authorized,~~$ 0.46 $ 0.~~001~~39 ~~par~~$ ~~value;~~0.41 ~~none~~========= ~~issued~~============ ~~and~~============= ~~outstanding~~========== --Diluted --net ~~Common~~income ~~stock,~~(loss) ~~10,000,000~~per ~~shares~~share: ~~authorized,~~Net income from continuing operations $ 0.~~001~~33 ~~par~~$ ~~value;~~0.53 ~~6,370,878~~$ ~~and~~0.35 ~~6,368,878~~$ ~~shares~~0.60 ~~issued~~Net atincome ~~July~~(loss) ~~28,~~from ~~2000~~discontinued ~~and~~operations ~~January~~0.04 ~~28,~~(0.07) ~~2000,~~0.04 ~~respectively~~(0.19) 6--------- 6------------ ~~Paid~~-in------------ ~~capital~~---------- ~~43,574~~Net ~~43,564~~income ~~Accumulated~~per ~~other~~share ~~comprehensive~~$ ~~loss~~0.37 ~~(67)~~$ ~~(34)~~0.46 ~~Note~~$ ~~receivable~~0.39 ~~from~~$ ~~stock~~0.41 ~~sale~~========= ~~(190)~~============ ~~(190)~~============= ~~Treasury~~========== ~~stock,~~Weighted ~~706,280~~average shares ~~and~~outstanding ~~510~~5,~~830~~519,731 ~~shares at July 28~~5,896,158 ~~2000 and January 28~~5,687,642 ~~2000~~6,079,082 ~~respectively~~Dilutive ~~(Note~~effect 4)of (5stock options 34,~~116)~~296 (330,~~841)~~047 ~~Retained earnings~~ 33,~~254~~864 3329,~~038~~297 ---------- ------------ ~~Total stockholders' equity 71,461 72,543~~ ------------- ---------- $Weighted 85average shares outstanding assuming dilution 5,~~316~~554,027 $5,926,205 885,~~094~~721,506 6,108,379 ========== ============ ============= ==========

See accompanying notes to condensed consolidated financial statements. 2 OROAMERICA, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

For the ~~For~~Thirty-nine ~~the Thirteen~~ Weeks Ended ~~Twenty-Six~~October ~~Weeks~~27, ~~Ended~~October 29, (DOLLARS IN THOUSANDS) 2000 1999 --------------------------- --------------------------- ~~July 28, July 30, July 28, July 30, 2000 1999 2000 1999~~ ----------- ----------- ----------- ------------------------------------------- ~~Net~~CASH ~~sales~~FLOWS $FROM ~~26,448~~OPERATING $ACTIVITIES: ~~28,327~~Net income $ 642,~~108~~249 $ 652,~~975~~504 ~~Cost~~Less ofincome ~~goods~~(loss) ~~sold,~~from ~~exclusive~~discontinued ofoperations ~~depreciation~~238 21(1,~~885~~164) ~~23,418 52,787 55,376~~ ----------- --~~---------~~ ----------- --~~---------~~ ~~Gross~~Net ~~profit~~income ~~4,563~~from ~~4,909~~continuing ~~11,321~~operations 102,~~599~~011 ~~Selling~~3,668 ~~general~~Adjustments ~~and~~to ~~administrative~~reconcile ~~expenses~~net ~~5,281~~income ~~4,426~~from ~~9,990~~continuing ~~8,352~~operations to net cash provided by (used in) continuing operations: Depreciation and amortization ~~expense~~2,604 ~~865~~2,126 ~~670~~Provision ~~1,756~~for ~~1,332~~losses ~~Interest~~on ~~expense~~accounts ~~406~~receivable ~~295~~141 ~~806~~99 ~~589~~Provision ~~Other~~for ~~income~~estimated returns (12,~~103~~004) (~~205~~152) (~~1,489~~Gain) loss on sale of property (~~507~~696) ~~-----------~~20 ~~-----------~~Change ~~-----------~~in ~~-----------~~assets ~~Total~~and ~~expenses~~liabilities: ~~5,449~~Accounts ~~5,186~~receivable 11(16,~~063~~073) 9(20,~~766~~383) ~~-----------~~Other ~~-----------~~accounts ~~-----------~~and ~~-----------~~notes receivable 150 5 Inventories (~~Loss~~145) ~~income~~(3,323) ~~from~~Prepaid ~~continuing~~income ~~operations~~taxes ~~before~~and income taxes ~~(886)~~payable ~~(277)~~785 ~~258~~611 ~~833~~Prepaid ~~(Benefit)~~items ~~provision~~and ~~for~~other ~~income~~current ~~taxes~~assets (~~328~~77) (~~110~~341) 95Accounts ~~334~~payable, accrued expenses and deferred liabilities 240 3,042 ------------- ------------- Net cash used in operating activities of continuing operations (13,064) (14,628) ------------- ------------- ~~Net~~CASH ~~(loss)~~FLOWS ~~income~~FROM ~~from~~INVESTING ~~continuing~~ACTIVITIES: ~~operations~~Capital expenditures (~~558~~952) (~~167~~5,054) ~~163~~Proceeds ~~499~~from ~~Net~~sale ~~income~~of ~~(loss)~~property ~~from~~772 ~~discontinued~~10 ~~operations~~Purchase 43of ~~(480)~~available 53for sale securities - (~~701~~270) ------------- -------------- Net cash used in investing activities of continuing operations (180) (5,314) ------------- -------------- ~~Net~~CASH ~~(loss)~~FLOWS ~~income~~FROM $FINANCING ~~(515)~~ACTIVITIES: $Gross ~~(647)~~borrowings $under ~~216~~line-of-credit $agreement ~~(202)~~- ~~===========~~5,700 ~~===========~~Purchase ~~===========~~of ~~===========~~treasury ~~Basic~~stock ~~net income~~ (~~loss~~2,720) ~~per share: Net income~~ (~~loss~~3,265) ~~from~~Issuance ~~continuing~~of ~~operations~~common $stock ~~(0.~~10) $13 ~~(0.03) $ 0.03 $ 0.07 Net income (loss) from discontinued operations 0.01 (0.08) 0.01 (0.11)~~ ----------- --~~---------~~ ----------- --~~---------~~ Net ~~income~~cash (~~loss)~~used ~~per share $ (0.09~~in) $provided ~~(0.11)~~by $financing ~~0.04~~activities $of ~~(0.04) =========== =========== =========== =========== Diluted net income (loss) per share: Net income (loss) from~~ continuing operations $ (~~0.10~~2,710) $2,448 ~~(0.03) $ 0.03 $ 0.07 Net income (loss) from discontinued operations 0.01 (0.08) 0.01 (0.11)~~ ------------- ------------- CASH (USED IN) PROVIDED BY DISCONTINUED OPERATIONS (151) 21 ------------- ------------- ~~Net~~DECREASE ~~income~~IN ~~(loss)~~CASH ~~per~~AND ~~share~~CASH $EQUIVALENTS (~~0.09~~16,105) $ (~~0.11~~17,473) $CASH ~~0.04~~AND $CASH ~~(0.04)~~EQUIVALENTS ~~===========~~AT ~~===========~~BEGINNING ~~===========~~OF ~~===========~~PERIOD ~~Weighted average shares outstanding 5~~26,~~718,565~~923 630,~~068,878~~263 ~~5,772,348 6,170,545 Dilutive effect of stock options~~ -- -- ~~33,277~~ -- -------~~----~~ ----------- --~~---------~~ ~~-----------~~CASH ~~Weighted~~AND ~~average~~CASH ~~shares~~EQUIVALENTS ~~outstanding~~AT ~~assuming~~END ~~dilution~~OF ~~5,718,565~~PERIOD ~~6,068,878~~$ 510,~~805,625~~818 6$ 12,~~170,545~~790 =========== ==~~=========~~ =========== ==~~=========~~

See accompanying notes to condensed consolidated financial statements. 3 OROAMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION The consolidated financial statements included herein include all adjustments, all of which are of a normal recurring nature, that, in the opinion of management, are necessary for a fair presentation of financial information for the thirteen and thirty-nine week periods ended October 27, 2000 and October 29, 1999. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these consolidated statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's January 28, 2000 audited consolidated financial statements. The results of operations for the thirteen and thirty-nine week periods ended October 27, 2000 are not necessarily indicative of the results for a full year. Net income per share Basic net income per share excludes all dilution and is computed by dividing net income by the weighted-average number of common shares outstanding. Diluted net income per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. Diluted net income per share includes the dilutive effect of stock options. Reclassifications In fiscal 2000, the Company elected to reclassify certain expenses in its Consolidated Statements of Income. As a result, net sales, cost of sales, and selling, general and administrative expenses have been restated for all periods presented to reflect these new classifications. The effect of this reclassification was to decrease net sales, increase cost of sales and decrease selling, general and administrative expenses for all periods presented. This change in classification has no effect on previously reported net income or earnings per share. In January 2000, the Company decided to discontinue its cigar operating segment. As a result, the Company's cigar operations have been classified as discontinued operations for all periods presented. Statement of Cash Flows For the purposes of reporting cash flows, cash and cash equivalents include amounts held at financial institutions or highly liquid investments with original maturities of ninety days or less when purchased. The fair value of cash and cash equivalents approximates their carrying amount. Supplemental cash flow information and non-cash investing and financing activities are as follows:

For the ~~Twenty~~Thirty-~~six~~nine ~~Weeks~~weeks ~~Ended~~ended ~~July 28, July 30, (Dollars in thousands) 2000 1999~~ -----------------------------------------------~~---------------------------------------------------~~ ~~CASH FLOWS FROM OPERATING ACTIVITIES: Net income~~ (loss) $ 216 $ (202) Less income (loss) from discontinued operations 53 (701) -------- -------- Net income from continuing operations 163 499 Adjustments to reconcile net income from continuing operations to net cash provided by (used in) ~~continuing operations: Depreciation and amortization 1,756 1,332 Provision for losses on accounts receivable 226 330 Provision for estimated returns (5,467~~thousands) ~~(3,430)~~October ~~Gain on sale of property (696) (10) Change in assets and liabilities: Accounts receivable 8~~27,~~834~~ ~~10,755~~2000 ~~Other~~October ~~accounts and notes receivable 258 320 Inventories 1~~29,~~087~~1999 ~~(3,989) Prepaid income taxes and income taxes payable (408) (960) Prepaid items and other current assets (286) (516) Accounts payable, accrued expenses and deferred liabilities (1,445) (5,002)~~ -------- -------- ~~Net cash provided by (used in) operating activities of continuing operations 4,022 (671)~~ -------- -------- ~~CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (666) (3,513) Proceeds from sale of property 772 10 Purchase of available for sale securities~~ -- ~~(270)~~ -------- -------- ~~Net cash used in investing activities of continuing operations 106 (3,773)~~ -------- -------- ~~CASH FLOWS FROM FINANCING ACTIVITIES: Purchase of treasury stock (1,275) (1,764) Issuance of common stock 10 13~~ -------- -------- ~~Net cash used in financing activities of continuing operations (1,265) (1,751)~~ -------- -------- ~~CASH PROVIDED BY DISCONTINUED OPERATIONS 37 21~~ -------- --~~------~~ ~~INCREASE~~Cash ~~(DECREASE)~~paid INduring ~~CASH~~the ~~AND~~year ~~CASH~~for: ~~EQUIVALENTS~~Interest 2$1,~~900~~308 ~~(6,174)~~$986 ~~CASH~~Taxes ~~AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 26,923 30,263 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD~~ $480 ~~29,823~~ $839 ~~24,089 ======== ======== Supplemental disclosure of~~ Non-cash ~~flow~~investing ~~information:~~and ~~Interest~~financing ~~paid~~activities $Insurance ~~829~~claim $(Note ~~494~~3) ~~Income taxes paid~~ $ ~~472~~- $ ~~826~~1,426

4 NOTE 2 - INVENTORIES Inventories consist of the following (in thousands, except per ounce data):

~~July~~October 2827, January 28, 2000 2000 ------------- ------------- (Unaudited) Gold and other raw materials $ 3,~~628~~090 $ 3,264 Manufacturing costs and other 1113,~~823~~620 13,478 ------------- ------------- Jewelry inventories 1516,~~451~~710 16,742 LIFO cost less than FIFO cost (1239) (216) Allowance for vendor advances (680) (680) ------------- ------------- $ 1415,~~759~~991 $ 15,846 ============= ============= Gold price per ounce $ ~~278~~263.1080 $ 286.75 ============= =============

The Company values its jewelry inventories using the last-in, first-out (LIFO) method. The Company has several consignment agreements with gold consignors providing for a maximum aggregate consignment of 365,000 fine troy ounces. In accordance with the consignment agreements, title remains with the gold consignors until purchased by the Company. At October 27, 2000 and January 28, 2000, the Company held approximately 234,700 and 227,600 fine troy ounces of gold under consignment agreements, respectively. Consigned gold is not included in inventory and no related liability is recorded on the Company's balance sheet. The purchase price per ounce is based on the daily Second London Gold Fixing. Manufacturing costs included in inventory represent costs incurred to process consigned and Company owned gold into finished jewelry products. The gold consignors and the Company's revolving credit lender (Note 4) have a security interest in substantially all the assets of the Company. The Company pays to the gold consignors a consignment fee based on the dollar equivalent of ounces outstanding, computed based on the Second London Gold Fixing, as defined in the agreements. Each consignment agreement is terminable on 30 days notice by the Company or the consignor. The gold consignment agreements require the Company to comply with certain covenants, as defined under the agreements. At October 27, 2000, the Company was in compliance with all of the requirements of its consignment agreements. NOTE 3 -INSURANCE CLAIM In fiscal 2000, the Company had a number of disputes with its former Indonesian partner. In connection with this, the Company was prevented access to its Indonesian tobacco inventories, which approximated $1.4 million at October 29, 1999. As a result, the Company filed a claim under its insurance policy for the recovery of cost of the related inventories. The Company's insurance carrier paid the claim in full in January 2000. NOTE 4 - NOTES PAYABLE The Company has a $20 million revolving credit facility with Bank of America, N.A., which expires February 1, 2001. Available borrowings must not exceed the lesser of $20 million or 75% of eligible accounts receivable minus a reserve amount, as provided for under the credit facility. Advances under the credit facility bear interest at the lender's prime rate minus 0.25%, or, at the Company's option, at short-term fixed rates or rates determined by 5 reference to offshore interbank market rates plus 1.75%. No short-term advances were outstanding at October 27, 2000 or January 28, 2000. The revolving credit facility also provides for the issuance of banker's acceptances and for the issuance of letters of credit in an aggregate amount not to exceed $2.5 million at any one time. Banker's acceptances bear interest at a rate based on the bank's prevailing discount rate at the time of issuance plus 1.75%. No banker's acceptances were outstanding as of October 27, 2000 or January 28, 2000. Stand-by letters of credit outstanding at October 27, 2000 and at January 28, 2000 totaled $1,000,000 and $1,000,000, respectively. Amounts outstanding under the Bank of America credit agreement are secured by substantially all of the Company's assets; the Company's gold consignors also have security interests in these assets, and all of the consignors and Bank of America are parties to a collateral sharing agreement. The revolving credit agreement contains substantially the same covenants and other requirements as are contained in the Company's gold consignment agreements. At October 27, 2000, the Company was in compliance with all of the requirements of the revolving credit agreement. NOTE 5 - STOCK REPURCHASE PROGRAM In fiscal 1999, the Company's Board of Directors approved a stock repurchase program pursuant to which the Company is authorized to purchase up to 300,000 shares of its outstanding common stock in the open market at prevailing market prices or off the market in negotiated transactions. Since the inception of the stock repurchase program, the Board of Directors has authorized the Company to repurchase an additional 900,000 shares for a total of 1.2 million shares authorized for repurchase. During the thirty-nine weeks ended October 27, 2000, the Company repurchased 395,650 shares for an aggregate price of approximately $2.7 million. At October 27, 2000, the Company has repurchased a total of 906,480 shares at an approximate cost of $6.6 million under the program. NOTE 6 - NEW ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board issued Statement No. 133, "Accounting for Derivatives and Hedging Activities" ("SFAS 133"), which the Company is required to adopt in fiscal years beginning after June 15, 2000. SFAS 133 requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. Additionally, SFAS 133 defines the accounting for changes in the fair value of the derivatives depending on the intended use of the derivative. The impact of SFAS 133 on the Company's financial statements will depend on a variety of factors, including, the extent of the Company's hedging activities, the types of hedging instruments used and the effectiveness of such instruments. The Company is currently assessing the impact SFAS 133 will have on its consolidated financial statements. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read together with the financial statements and notes thereto. General The Company's business, and the jewelry business in general, is highly seasonal. The third and fourth quarters of the Company's fiscal year, which include the Christmas shopping season, historically have accounted for approximately 60% of the Company's annual net sales and a somewhat higher percentage of the Company's income before taxes. The seasonality of the Company's business places a significant demand on working capital resources to provide for a build up of inventory in the third quarter (which is primarily satisfied by an increase in the amount of gold held under consignment) and in turn has led to a seasonal build up in customer receivables in the fourth quarter that may be funded by increased borrowings. Consequently, the results of third quarter operations are not necessarily indicative of the Company's performance for an entire year. Prices for the Company's products generally are determined by reference to the current market price of gold. Consequently, the Company's sales could be affected by significant increases, decreases or volatility in the price of gold. The Company accounts for its jewelry inventories at the lower of cost or market, using the last-in, first-out (LIFO) method to determine cost, less the allowance for vendor advances. As a result, the Company's gross profit margin can be affected by changes in LIFO reserves and the allowance for vendor advances, as well as by changes in the amount of gold owned at each period end and fluctuations in the price of gold. Results of Operations The following table sets forth, for the periods indicated, the percentage of net sales represented by certain items included in the Consolidated Statements of Income. 7

AS A PERCENTAGE OF NET SALES ----------------------------~~-------------------~~ ~~THIRTEEN~~Thirteen ~~WEEKS~~Weeks ~~ENDED~~Ended ~~TWENTY~~Thirty-~~SIX~~nine ~~WEEKS~~Weeks ~~ENDED~~Ended ~~JULY~~October 2827, ~~JULY~~October 3029, ~~JULY~~October 2827, ~~JULY~~October 3029, 2000 1999 2000 1999 ---------- ---------- ---------- ---------- Net sales 100.0% 100.0% 100.0% 100.0% Cost of goods sold 8280.78 8280.5 81.7 82.34 ~~83.9~~ ------- -------- ----------- ------------ Gross profit 1719.32 1719.5 18.3 17.76 ~~16.1~~------- -------- ----------- ------------ Selling, general and administrative expenses 2010.08 158.60 1513.65 1210.85 Depreciation and amortization 31.38 21.4 2.73 21.08 Interest expense 1.52 1.04 1.32 01.91 Other income (40.27) (0.73) (21.36) (0.86) ------- -------- ----------- ------------ Total expense 2013.61 1810.35 1715.34 1412.98 ------- -------- ----------- ------------ ~~(Loss)~~Income ~~income~~ before income taxes (36.~~3) (~~1 9.0) 02.49 14.28 ~~(Benefit)~~Provision ~~provision~~ for income taxes ~~(1.~~2).3 (03.4)3 01.1 01.58 ------- -------- ----------- ------------ Net ~~(loss)~~ income from ~~con-~~continuing ~~tinuing~~ operations (23.1)8 (05.6)7 01.38 03.70 Net income (loss) from ~~dis-~~discontinued ~~continued~~ operations 0.24 (10.78) 0.02 (1.0) ------- -------- ----------- ------------ Net income ~~(loss)~~4.2% (14.9)% (2.~~3)%~~ 0.3% (02.3)0% ======= ======== =========== ============

THIRTEEN WEEKS ENDED OCTOBER 27, 2000 COMPARED TO THIRTEEN WEEKS ENDED OCTOBER 29, 1999. Net sales for the thirteen weeks ended October 27, 2000 decreased by $6.6 million, or 12.1%, from the comparable period of the prior year. This decrease was primarily attributable to a decrease in the amount of gold jewelry (by weight) sold. The Company attributes this decrease to certain major retailers managing inventories at reduced levels. Gross profit for the thirteen weeks ended October 27, 2000 decreased by $1.5 million, or 13.8%, from the comparable period of the prior year. As a percentage of net sales, gross profit was 19.2% for the current quarter compared to 19.5% for the third quarter of fiscal 2000. Excluding the effects of LIFO reserve adjustments on cost of goods sold, the gross margin for the thirteen-week periods ended October 27, 2000 and October 29, 1999 would have been 19.2% and 21.1%, respectively. The decrease on a comparable basis was due to changes in customer and sales product mix. The gold prices used to cost inventory at October 27, 2000, July 28, 2000, October 29, 1999, and July 30, 1999 were $263.80, $278.10, $299.10, and $255.60, respectively. Selling, general and administrative expenses for the thirteen weeks ended October 27, 2000 increased by $802,000, or 18.3%, from the comparable period of the prior year. This increase is primarily attributable to increased personnel costs of $237,000, and increased consulting and professional services expense of $286,000. Personnel costs have risen due to increased head count from expanded product development activities. Consulting services have increased primarily due to expanded use of computer consultants. Depreciation and amortization expense for the thirteen weeks ended October 27, 2000 increased $54,000, or 6.8%, from the comparable period of the prior year. This increase is due to additional depreciation expense from fiscal 2000 capital expenditures, which totaled approximately $6.9 million. Interest expense for the thirteen weeks ended October 27, 2000 decreased approximately $167,000, or 22.4%, from the comparable period of the prior year. This decrease results from reduced borrowings under the gold consignment agreements, offset by an increase in gold forward purchase contracts outstanding and an increase in the rates charged thereon. 8 Other income for the thirteen weeks ended October 27, 2000 increased by $133,000, or 73.5%, from the comparable period of the prior year. This increase results from increased interest income on invested funds. The effective tax rate in the thirteen week periods ended October 27, 2000 and October 29, 1999 was 37%. Net income from discontinued operations for the thirteen weeks ended October 27, 2000 was $185,000 compared to a net loss of $463,000 for the same period of the prior year. The increase on a comparable basis was due to legal fees incurred in connection with the Company's insurance claim related to its Indonesian tobacco inventories which were recorded in October 1999 and which were not repeated in the current quarter. During the quarter ended October 27, 2000, the remaining finished cigar inventories were sold. THIRTY-NINE WEEKS ENDED OCTOBER 27, 2000 COMPARED TO THIRTY-NINE WEEKS ENDED OCTOBER 29, 1999. Net sales for the thirty-nine weeks ended October 27, 2000 decreased by $8.5 million, or 7.0%, from the comparable period of the prior year. This decrease was primarily attributable to a decrease in the amount of gold jewelry (by weight) sold. The Company attributes this decrease to certain major retailers managing inventories at reduced levels. Gross profit for the thirty-nine weeks ended October 27, 2000 decreased by $762,000, or 3.6%, from the comparable period of the prior year. As a percentage of net sales, gross profit increased from 17.6% for the thirty-nine weeks ended October 29, 1999, to 18.3% for the current period. Excluding the effects of LIFO reserve adjustments on cost of goods sold, the gross margin for the thirty-nine week periods ended October 27, 2000 and October 29, 1999 would have been 18.1% and 17.6%, respectively. The increase on a comparable basis was due to reduced material costs. The gold prices used to cost inventory at October 27, 2000, January 28, 2000, October 29, 1999, and January 29, 1999 were $263.80, $286.75, $299.10, and $285.40, respectively. Selling, general and administrative expenses for the thirty-nine weeks ended October 27, 2000 increased by $2,438,000, or 19.1%, from the comparable period of the prior year. The increase in the amount of selling, general and administrative expenses is primarily attributable to increased personnel costs of $1.1 million, increased consulting and professional services expense of $814,000, and increased selling and product expense of $326,000. Personnel costs have risen due to expanded product development activities. Selling and product expenses have increased due to expanded sales efforts at trade shows and expanded magazine and catalog advertising of the Company's products, including the new PushlockTM clasp, offset by decreased sales commissions. Consulting and professional service expense has risen due to increased use of computer consultants and increased legal fees related to certain ongoing litigation. Depreciation and amortization expense for the thirty-nine weeks ended October 27, 2000 has increased $478,000, or 22.5%, from the comparable period of the prior year. This increase is due to additional depreciation expense from fiscal 2000 capital expenditures, which totaled approximately $6.9 million. Interest expense for the thirty-nine weeks ended October 27, 2000 increased approximately $51,000, or 3.8%, from the comparable period of the prior year. This increase results from an increase in gold forward purchase contracts outstanding and an increase in the rates charged thereon, offset by reduced borrowings under the gold consignment agreements. Other income for the thirty-nine weeks ended October 27, 2000 increased by $1.1 million or 161.9%, from the comparable period of the prior year. This 9 increase is primarily due to the gain resulting from the sale of certain jewelry machinery and from increased interest income on invested funds. The effective tax rate in the thirty-nine week periods ended October 27, 2000 and October 29, 1999 was 37%. Net income from discontinued operations for the thirty-nine weeks ended October 27, 2000 was $238,000 compared to a net loss of $1,164,000 for the comparable period of the prior year. The increase on a comparable basis was due to the write-off of assets related to the Company's Beverly Hills cigar store, which was closed in June 1999, and increased legal fees related to the Company's insurance claim related to its Indonesian inventories. No similar write-off of assets or legal expense took place in the current period. Liquidity and Capital Resources The Company has satisfied its working capital requirements through internally generated funds, a gold consignment program and borrowings under its revolving credit facilities. A substantial portion of the Company's gold supply needs have been satisfied through gold consignment arrangements with various banks and bullion dealers. Under the consignment arrangements, the Company may defer the purchase of gold used in the manufacturing process and held in inventory until the time of sale of finished goods to customers. The gold consignment agreements contain covenants restricting the amount of consigned gold the Company may reconsign or otherwise have outside its possession at any one time. The aggregate amount of gold that the Company may acquire under its consignment arrangements was approximately 365,000 ounces at October 27, 2000 and is subject to fluctuations based on changes in the market value of gold. At October 27, 2000, the Company held approximately 234,700 ounces of gold on consignment. The Company has a $20 million revolving credit facility with Bank of America, N.A., which expires February 1, 2001. Available borrowings may not exceed the lessor of $20 million or 75% of eligible accounts receivable minus a reserve amount, as provided for under the credit facility. For further information regarding the Company's gold consignment agreements and revolving credit facilities, see Notes to Consolidated Financial Statements and the Company's January 28, 2000 audited Consolidated Financial Statements. Net accounts receivable increased from $15.3 million at January 28, 2000 to $33.6 million at October 27, 2000. The increase in net accounts receivable results primarily from seasonal fluctuations in sales. The allowance for returns and doubtful accounts decreased from $11.8 million at January 28, 2000 to $9.7 million at October 27, 2000. The decrease in the amount of the allowance at October 27, 2000 is primarily attributable to seasonal adjustments in the reserve for returns. Inventories increased from $15.8 million at January 28, 2000 to $16.0 million at October 27, 2000. At October 27, 2000, a substantial portion of the gold included in the Company's finished goods and work in process consisted of gold acquired pursuant to the Company's consignment program. Consigned gold is not included in inventory. Accounts payable decreased from $5.7 million at January 28, 2000 to $4.5 million at October 27, 2000. This decrease is primarily attributable to seasonal gold purchases and the timing of payments thereon. Accrued expenses increased from $8.7 million at January 28, 2000 to $9.9 million at October 27, 2000. This increase is primarily due to increased payroll liabilities and increased cooperative advertising accruals. 10 The Company incurred capital expenditures of approximately $952,000 for the thirty-nine weeks ended October 27, 2000, principally related to computer equipment and facility improvements. The Company expects to incur capital expenditures of $700,000 during the balance of fiscal 2001, principally for the acquisition of manufacturing facilities and equipment, and computer equipment. The Company believes that funds generated from operations, the gold consignment program and the borrowing capacity under its revolving credit facility will be sufficient to finance its working capital and capital expenditure requirements for at least the next 12 months. 11 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 27 Financial Data Schedule. (b) Reports on Form 8-K: None 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. OROAMERICA, INC. Date: DECEMBER 4, 2000 By: /s/ SHIU SHAO ---------------- --------------------------- SHIU SHAO, Director, Chief Operating Officer, Chief Financial Officer, and Vice President Date: DECEMBER 4, 2000 By: BETTY SOU ---------------- --------------------------- BETTY SOU, Controller 13

Filing Compare · OROAMERICA INC